Parafin is a full-stack embedded financial services company that enables platforms to provide financing to businesses by abstracting away the complexity of capital markets, underwriting, originations, servicing, compliance, and customer support. In less than three years, Parafin has partnered with Amazon, DoorDash, and more platforms to serve tens of thousands of businesses and extended five billion dollars in offers. By powering the financial services of marketplaces and payment processors, sellers are able to manage and scale their businesses in evolving economic conditions.

It’s a win-win for platforms and their sellers – small businesses get access to the capital they need to invest in their growth; platforms deepen their relationships with sellers, and increase GMV across their platform through their sellers’ success.

As a turnkey solution, Parafin is a one-stop-shop for credit: everything from underwriting to the funding, servicing, and supporting the capital product. Money movement, therefore, is an important part of their platform and the overall customer experience. Here’s a simplified version of Parafin’s payment flows:

1. Parafin instantly underwrites the seller and provides a transparent capital offer.
2. Once the offer is accepted, Parafin sends the seller the funds.
3. Parafin debits a percentage of the seller’s sales to pay back the capital.

To support these flows, Parafin required a payments solution that afforded a high degree of speed, control, and flexibility.

Parafin needed faster payments to fund the sellers as soon as they accepted a capital offer. They needed control to offer their partners a fully whitelabelled solution. “Our payments product had to feel like our partner’s product,” said Ralph Furman. This meant that Parafin needed the ability to:

• Customize payment description strings to match their partners’ names.
• Pull up individual payment statuses to answer support questions.
• Retrieve data to create reports and run analytics for partners.
• Control the timing of ACH batches.

Flexibility was the final consideration. As an agile platform continuously launching new products and programs, Parafin needed the ability to quickly add new payment products to the platform.

After looking at various options in the market, Parafin knew that they required direct bank relationships to achieve the speed, control, and flexibility that they needed. “It was really a question of us using Modern Treasury or building bank integrations,” said Ralph. “There weren’t really any other options on the horizon that we felt addressed the specific needs that we had.”

With a strong background in FinTech, Parafin considered building direct integrations with their banks, but were cognizant of the opportunity costs of building from scratch. Specifically, Parafin wanted to ensure that they minimized development costs and time to go live.

As an actively scaling platform, Parafin had many demands on its engineering teams. And, they knew from past experience that building a bank integration wasn’t an easy process. Beyond the bank integration, Parafin recognized that they would need additional tooling, including a dashboard to properly manage their payment flows and give visibility to the team and processes to reconcile payment activity. They would need to build and maintain all of this themselves.

Between the bank integrations and the internal toolings, Parafin realized that building programmatic payments and reconciliation from scratch would be a serious, ongoing engineering investment, spanning multiple months. This was more than they wanted to commit to with so many other needs across their platform. “We did not want to spend precious engineering time building something that we didn’t need to,” explained Ralph.

Upon an initial review, Parafin was confident that Modern Treasury was the right solution for them. Modern Treasury provided clear public documentation, a self-serve developer sandbox, and pre-built bank integrations that would save countless development hours. In addition, Modern Treasury offered the support and clarity of direction that affirmed to Parafin that this would be the fastest, easiest path to go live.

For Parafin, getting up and running with Modern Treasury was seamless. Modern Treasury made everything clear and direct – from the API documentation, to the customer support, even the guidance to send a specific integration email to a designated contact at their bank.

”It took three months from the time we committed to our business model to having our first dollar out the door. I would really say that a lot of that has been a testament to the relationship which we’ve had with Modern Treasury.”

Ralph Furman, Co-founder at Parafin

Within just days, Parafin was able to begin configuring workflows and sending payment orders in the Modern Treasury dashboard.

Modern Treasury also gave Parafin the control and visibility they needed to provide an embedded, white-labeled payments product to their partners.

For example, before automating their payments, Parafin was able to manually create payment orders and architect workflows in the dashboard. This gave Parafin confidence and visibility into their payments as they were launching their product. As Parafin became more comfortable with their payment flows, they started automating their workflows with Modern Treasury’s APIs – first, their payment orders to the banks, then counterparty (i.e., seller) details; they then subscribed to Modern Treasury’s webhooks to track statuses and manage returns.

“The real appeal of Modern Treasury was that we were able to easily develop a no-code version of the product almost instantly. And then, once we were able to get some system experience, we were able to progressively automate and productionalize.”

With Modern Treasury’s mirrored dashboard / API platform, Parafin could take full advantage of programmatic money movement, without feeling like they had to sacrifice control or visibility into their workflows.

Lastly, Modern Treasury’s intuitive platform gave Parafin the tools to manage and report on their payment flows to their partners, users, and external third-parties. Multiple teams at Parafin use the Modern Treasury platform to execute their jobs, or better understand their payment functions. A couple examples below:

• To customize payment description strings, Parafin’s engineering team modifies payment descriptors in the Modern Treasury API to achieve a white-labeled experience.
• To answer client support questions, Parafin’s support team uses their read-only privileges to track payment statuses.
• To fund loans and advances, Parafin's funding operations team approves payment orders in the app upon completion of the funding checklist, which inclused a review of past payment activity for potential issues (e.g., ACH returns).
• To retrieve data to create reports and analytics internal use cases and for partners, Parafin uses the push-to-warehouse product.
• To control account verification, Parafin uses Modern Treasury’s multiple authentication options.
• To efficiently and programmatically transfer excess funds between internal accounts, Parafin's accounting team has established sweep rules to automatically sweep excess funds from collections accounts to disbursements accounts on a daily basis.

Parafin has grown tremendously in the past few years, as the need for capital and small businesses funding has increased. Recently, they announced partnerships with a number of high-growth platforms, including Hostaway and Xplor Technologies. They anticipate continued growth in the years ahead as they onboard new platforms and products.

Parafin is in the process of migrating its capital products onto the Modern Treasury ledger product. In addition to the well understood benefits of a double-entry ledger such as immutability, this migration is expected to support Parafin in scaling its accounting and reporting infrastructure by offering a single source of truth for account balance and cash flows. This will also enable Parafin to generalize their money movement pipelines across product offerings, as well as introduce a back office accounting structure to the codebase.

Through its partnership with J.P. Morgan and Modern Treasury, Parafin expects to begin offering instant capital disbursements via RTP and FedNow rails. This will allow them to get capital to small businesses when they need it, including on weekends and holidays.